Super Bowl Sunday likely won’t be remembered as one of Carolina Panthers quarterback Cam Newton’s favorite days. It’s a fair bet that April 15, Tax Day, won’t be up there, either.
After six sacks, two fumbles, relentless attacks by the media for not diving for the ball and then sulking out of his post-game press conference, the last thing Newton needs is the government coming after him, too.
Well, so much for that.
Because of an absurdly high tax rate in California, Newton will pay more in taxes to the state than he made during the seven days he spent in the Golden State preparing for the Super Bowl. According to calculations by K. Sean Packard, a certified public accountant writing at Forbes, Newton will owe California $87,800 in taxes on the $51,000 he made while in the state. That’s an effective tax rate of 172.2 percent.
Had Newton come out on top in the big game, he would at least have avoided paying California for the opportunity to play in the Super Bowl, being taxed $88,000 of an estimated $102,000 earned. But that still comes out to a whopping 87 percent of his earnings.
Part of this is due to the bizarre tax rules that adversely affect athletes. States usually calculate the amount of “duty days” an athlete spends in the state, and then use that number to tax a portion of an athlete’s entire annual salary. So Cam Newton pays California’s top income tax rate of 13.3 percent on a portion of his multi-million dollar salary, eliminating his “Super Bowl bonus” completely.
In other words, writes Cato Institute senior fellow Daniel J. Mitchell, “Cam Newton will pay a Barack Obama-style flat tax. The rules are very simple. The government simply takes all your money.”
Once Newton finishes filing all of his state tax returns, he’ll then need to pay the federal government a 40.5 percent tax on his earnings. Talk about a great end to the season.
California’s fondness for high taxes doesn’t just hurt athletes. The state has been struggling in recent years, leading many to move away in what experts call “The Great California Exodus.” A report by the Manhattan Institute, a leading free-market think tank, noted the mass amounts of people and companies leaving for states like Colorado and Texas. “The data suggest that many cost drivers—taxes, regulations, the high price of housing and commercial real estate, costly electricity, union power, and high labor costs—are prompting businesses to locate outside California, thus helping to drive the exodus.”
If California’s politicians continue to pursue these policies, they will discourage innovation, increase unemployment, and cause greater financial trouble for the people they’re trying to help.
In the meantime, correctly figuring out Newton’s taxes is about as easy as it is for an NFL referee to determine what constitutes a catch. And in both cases, the Panthers star will come out on the losing end.